AT THE end of April the Competition Commission announced the findings of a two year probe into supermarket "land-banking" and the use of "restrictive covenants".

Nine towns in Scotland - Dundee, Livingston, South Queensferry, Biggar, Hawick, Largs, Elgin, Fort William and Portree - were identified among 90 in the UK where supermarkets' practices thwarted other retailers. In some instances land was purchased to prevent rivals acquiring and developing competing stores. In others, clauses were put into leases that restricted multiple retailers from purchasing their land or developing outlets.

As a result, the Commission has introduced measures designed to even the playing field. However, there is concern that these could gum-up an already treacly system.

David Innes, partner at Knight Frank in Scotland, says: "It's right to start the planning process on a level playing field, but the recommendation that the Scottish Government must include the Office of Fair Trading as a statutory consultee should be viewed with caution.

"If not managed efficiently, introducing another tier of bureaucracy in the planning system could stifle the process, particularly in the current slowing economy when retail investment should be encouraged."

The Commission said in a statement: "Although, in many areas, there is a good choice and strong competition between retailers, there are also a significant number of local areas where larger grocery stores face limited competition and local shoppers lose out. We are also taking action to prevent retailers using restrictive covenants and other agreements to frustrate entry by competitors in such areas."

It recommends that the Office of Fair Trading conducts a 'competition test' whenever a supermarket sub submits a planning application for a new store or extension over 10,760 sq ft. The OFT then tells a local authority if an application passes the test, which will influence the decisions of planning committees.

It is also seeking a change in the law, through an amendment to the Competition Act, outlawing exclusivity arrangements. This is where a supermarket prevents rival organisations building new stores in areas where it already has an operation.

Large grocery retailers will have to release the "restrictive covenants" identified in the report, own up to others not mentioned, and will not be allowed to include in a lease anything that restricts competition.

Innes adds: "Tesco, ASDA and Morrison's are the main operators in Scotland that will suffer from the new recommendations, due to having to release restrictive covenants.

We could see these supermarket chains losing market share as, potentially, a new operator to a town will be given support in the planning process, where previously they could not support a need argument."

However, the report does not require supermarkets to sell any stores or land or take any action regarding any stores they lease or sublet.

"The OFT needs to comment on any retail planning proposal within a specified timescale or their inclusion in the process could limit retail investment and the length of time it takes from planning to actual development of stores could be massively hindered," states Innes